Top Chinese venture fund dismisses talk of quitting ‘dead’ market, says focus now on AI

A top Chinese venture capital (VC) firm, which has backed some of the country’s most successful technology start-ups, has dismissed talk that it has decided to exit the primary market, at a time when there is heated debate over whether the country’s once-vibrant venture funding industry is “dead”.

Capital Today, which profited handsomely from its early investments in Chinese e-commerce platform JD.com, food delivery giant Meituan, and the country’s No 2 video gaming company NetEase, issued a statement to Chinese media outlets on Wednesday refuting market rumours that it has decided to pull back on venture capital investment.

The company said it has been actively seeking deals in the fields of artificial intelligence (AI), among others. Capital Today said it invested in an early-stage start-up called Stand AI in May, and increased its existing investment in Moonshot AI in July.

The denial comes as China’s VC market, once known for actively channelling capital into promising start-ups, has dried up, replaced by government funds chasing “hard tech” deals. Wang Ran, CEC Capital founding partner and chief executive, said in a speech last month that China’s primary market for venture investors is “dead” as deals have dried up.

Kathy Xu Xin, the founder of Capital Today, has been called “China’s venture capital queen” for her successful deals in the domestic internet sector.

While the company is still looking for deals in the AI sector, it is acting in tandem with many other venture capital houses to significantly scale down investments, according to two separate sources.

One source said the firm is pivoting to the secondary market, or openly traded stocks, as US dollars are retreating from China and deals are struggling to cash out due to tightened control over initial public offerings. Capital Today “rarely looks at” primary market deals except AI-related projects, according to the source familiar with the matter.

“Although there have been no layoffs recently, some staffers left earlier this year, leaving only a few colleagues remaining on the VC team,” the person said.

Capital Today did not respond to a request for additional information.

According to Chinese corporate database Tianyancha, Capital Today continues to place bets on China’s AI sector, backing large language model start-ups Moonshot AI and Zhipu AI in 2023. It was also an investor in Meituan co-founder Wang Huiwei’s AI start-up Guangnian Zhiwai, which was acquired by Meituan soon after Wang resigned for health reasons.

Initial public offerings (IPOs) by Chinese enterprises contracted in the first half of 2024, with only 82 firms going public domestically and abroad, a year-on-year drop of 62.4 per cent, according to research firm Zero2ipo. Total funds raised from IPOs amounted to 47 billion yuan (US$6.5 billion), down 79 per cent from a year earlier.